OCS to reduce product margins in latest move to combat illicit cannabis market

The Ontario Cannabis Store (OCS) said it will introduce a fixed markup pricing model that will ensure greater transparency and consistency for licensed producers when selling products to consumers. That markup will be set as a still-to-be-determined percentage above the price that a licensed producer will sell to OCS’s wholesale business, and is set to take effect this September. 

“As the exclusive wholesale distributor for legal recreational cannabis in Ontario, OCS is doing its part to support a vibrant cannabis marketplace that helps to displace illegal operators, while promoting social responsibility in connection with cannabis,” said David Lobo, president, and chief executive officer of the OCS, in a statement.

The OCS estimates that the move to adjust its margins and move to a fixed markup will result in a $35 million hit to its revenue during the current fiscal year and $60 million in the next fiscal year. The OCS business generated $186 million in profit during the fiscal 2021 year on $651 million in revenue and is expected to book $180 million in profits during its current fiscal year, according to the province’s fall economic statement released in November.

The mark-up plans also come after Ontario’s Auditor General blasted the OCS in Dec. 2021 for implementing a “value-based pricing” model without completing background research to justify switching to that scheme. After the Auditor General’s report was released, the OCS said it would complete a detailed review of its pricing policy.

To read the complete article, go to www.bnnbloomberg.ca

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